UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended:
SEPTEMBER 30, 2001
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from ________ to ________.
Commission File Number 0-24792
NTL (TRIANGLE) LLC
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-4086747
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 East 59th Street
New York, NY 10022
(212) 906-8440
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of Registrant's
principal executive offices)
__________________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
Yes X No
--- ---
__________________________
As of September 30, 2001, there were 800,000 shares of the Registrant's common
membership interests outstanding. The Registrant is an indirect, wholly owned
subsidiary of NTL Incorporated and there is no market for the Registrant's
Common Stock. The Registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with
the reduced disclosure format.
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION
- ------- ----------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 2001 (Unaudited) and December 31, 2000..........2
Condensed Consolidated Statements of Operations
for the Nine and Three Months Ended September 30, 2001
and 2000 (Unaudited)..........................................3
Condensed Consolidated Statement of Shareholder's Equity
for the Nine Months Ended September 30, 2001 (Unaudited)......4
Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 2001 and 2000
(Unaudited)...................................................5
Notes to Condensed Consolidated Financial Statements
(Unaudited)...............................................6 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............9 - 12
PART II. OTHER INFORMATION
- -------- -----------------
Item 6. Exhibits and Reports on Form 8-K.............................13
SIGNATURES...........................................................14
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
PART I. FINANCIAL INFORMATION
- ------- ---------------------
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
September 30, December 31,
2001 2000
----------------- -----------------
(Unaudited) (See Note)
(in (UK Pound)000's, except share data)
Assets
Current assets
Cash and cash equivalents................................................ (UK Pound)13,359 (UK Pound)4,706
Accounts receivable, less allowance for doubtful accounts of
(UK Pound)10,136 (2001) and (UK Pound)8,914 (2000)..................... 21,855 18,933
Other current assets..................................................... 5,929 13,850
----------------- -----------------
Total current assets................................................. 41,143 37,489
Property and equipment, net................................................. 473,403 466,157
Intangible assets, net...................................................... 363,396 395,683
Other assets, net........................................................... 6,961 21,276
----------------- -----------------
(UK Pound)884,903 (UK Pound)920,605
================= =================
Liabilities and shareholder's equity
Current liabilities
Accounts payable and accrued expenses.................................... (UK Pound)53,554 (UK Pound)53,268
Interest payable......................................................... 14,790 4,883
Deferred revenue......................................................... 10,803 14,928
Due to affiliates........................................................ 103 24,316
Current portion of long-term debt........................................ 867 662
----------------- -----------------
Total current liabilities.............................................. 80,117 98,057
Loans from affiliate........................................................ 58,194 25,549
Long-term debt, less current portion........................................ 354,500 348,761
Commitments and contingent liabilities
Deferred income taxes....................................................... 8,599 8,611
Shareholder's equity:
Common membership interests, (UK Pound).01 par value - authorized and
issued
800,000 shares......................................................... 8 8
Additional capital....................................................... 444,293 394,107
Accumulated other comprehensive income................................... 207 746
(Accumulated deficit) retained earnings.................................. (61,015) 44,766
----------------- -----------------
Total shareholder's equity............................................. 383,493 439,627
----------------- -----------------
(UK Pound)884,903 (UK Pound)920,605
================= =================
Note: The balance sheet at December 31, 2000 has been derived from the audited financial statements at that date.
See accompanying notes.
2
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
2001 2000 2001 2000
------------------ ------------------- ----------------- ------------------
(in (UK Pound)000's)
Revenue......................... (UK Pound)131,651 (UK Pound)117,291 (UK Pound)43,949 (UK Pound)39,679
------------------ ------------------- ----------------- ------------------
Costs and expenses
Operating.................... 60,490 51,128 18,397 20,659
Selling, general and 61,029 50,366 21,482 20,277
administrative.............
Other charges................ 833 - 833 -
Depreciation and amortization 76,952 62,692 25,362 22,600
------------------ ------------------- ----------------- ------------------
199,304 164,186 66,074 63,536
------------------ ------------------- ----------------- ------------------
Operating loss.................. (67,653) (46,895) (22,125) (23,857)
Other income (expense)
Interest expense............. (30,162) (26,271) (10,072) (9,294)
Interest expense to affiliate (2,029) - (808) -
Investment income............ 177 1,234 29 436
Exchange gains (losses)...... (6,080) (31,444) 16,076 (8,978)
------------------ ------------------- ----------------- ------------------
(38,094) (56,481) 5,225 (17,836)
------------------ ------------------- ----------------- ------------------
Loss before income taxes........ (105,747) (103,376) (16,900) (41,693)
Income tax (expense) benefit.... (34) 600 - 525
------------------ ------------------- ----------------- ------------------
Net loss........................ (UK Pound)(105,781) (UK Pound)(102,776) (UK Pound)(16,900) (UK Pound)(41,168)
================== =================== ================= ==================
See accompanying notes.
3
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
--------------------------------------------------------
(Unaudited)
(in 000's)
Retained
Accumulated Earnings
Compre- Other Compre- (Accum-
Common Additional hensive hensive ulated
Shares Par Capital Loss Income (Loss) Deficit) Total
------ --------- ----------------- ---------------- ------------- -------------- -----------------
Balance at December 31,
2000.................. 800 (UK Pound)8 (UK Pound)394,107 (UK Pound)746 (UK Pound)44,766 (UK Pound)439,627
Contribution from NTL
Group Ltd........... 50,186 50,186
Net loss.............. (UK Pound)(105,781) (105,781) (105,781)
Currency translation
adjustment.......... (539) (539) (539)
------------------
Comprehensive loss.... (UK Pound)(106,320)
---- ----------- ----------------- ------------------ ------------- ----------------- -----------------
Balance at September 30,
2001.................. 800 (UK Pound)8 (UK Pound)444,293 (UK Pound)207 (UK Pound)(61,015) (UK Pound)383,493
==== =========== ================= ============= ================= =================
See accompanying notes.
4
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
Nine Months Ended
September 30,
2001 2000
----------------- ----------------
(in (UK Pound)000's)
Net cash (used in) provided by operating activities.............. (UK Pound)(20,707) (UK Pound)41,399
----------------- ----------------
Investing activities
Purchases of marketable securities............................ - (2,166)
Proceeds from sales of marketable securities.................. - 2,199
Capital expenditures.......................................... (53,810) (70,514)
----------------- ----------------
Net cash used in investing activities................... (53,810) (70,481)
----------------- ----------------
Financing activities
Proceeds from investment in subsidiary........................ - 15,560
Loans from affiliate.......................................... 33,327 -
Contribution from NTL Group Limited........................... 50,186 -
Principal payments............................................ (337) (1,223)
----------------- ----------------
Net cash provided by financing activities............... 83,176 14,337
----------------- ----------------
Effect of exchange rate changes on cash................. (6) (386)
----------------- ----------------
Increase (decrease) in cash and cash equivalents................. 8,653 (15,131)
Cash and cash equivalents, beginning of period................... 4,706 27,895
----------------- ----------------
Cash and cash equivalents, end of period......................... (UK Pound)13,359 (UK Pound)12,764
================= ================
Supplemental disclosure of cash flow information
Cash paid during the period for interest...................... (UK Pound)20,456 (UK Pound)177
See accompanying notes.
5
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
NTL (Triangle) LLC (formerly NTL (Bermuda) Limited) (the "Company") have
been prepared in accordance with U.S. generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine and three months ended September 30, 2001 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2001. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
The Company is an indirect, wholly-owned subsidiary of NTL Incorporated
("NTL").
Certain prior period amounts have been reclassified to conform to the
current presentation.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations,"
and No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires
that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. SFAS No. 142 ends the
amortization of goodwill and indefinite-lived intangible assets. Instead,
these assets must be reviewed annually (or more frequently under certain
conditions) for impairment in accordance with this statement. This
impairment test uses a fair value approach rather than the undiscounted
cash flow approach previously required by SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." Intangible assets that do not have indefinite lives will continue to
be amortized over their useful lives and reviewed for impairment in
accordance with SFAS No. 121. The Company is required to adopt SFAS No. 142
as of January 1, 2002. The Company has not yet completed an analysis of
whether goodwill may be impaired under SFAS No. 142; this analysis will be
completed during the first six months of 2002 in accordance with the
transition provisions of SFAS No. 142. The Company expects to complete an
analysis for the fourth quarter of 2001 to determine whether goodwill is
impaired under SFAS No. 121. The magnitude of an impairment charge, if any,
under either accounting standard cannot be determined at this time.
2. Comprehensive Loss
The Company's comprehensive loss for the nine months ended September 30,
2001 and 2000 was (UK Pound)106.3 million and (UK Pound)104.1 million,
respectively. The Company's comprehensive loss for the three months ended
September 30, 2001 and 2000 was $16.0 million and $42.7 million,
respectively.
3. Restructuring Costs
Other charges in 2001 are for restructuring costs of (UK Pound)833,000
incurred by NTL Communications (Ireland) Limited (formerly Cablelink
Limited), a wholly-owned subsidiary of the Company. This charge consisted
of employee severance and related costs of (UK Pound)143,000 for 10
employees who were terminated, and lease exit costs of (UK Pound)690,000.
As of September 30, 2001, (UK Pound)79,000 of the provision had been used
for employee severance and related costs. The remaining restructuring
reserve of (UK Pound)754,000 includes (UK Pound)64,000 for employee
severance and related costs and (UK Pound)690,000 for lease exit costs.
The Company recorded restructuring costs in November 2000 as a result of
the completion of a consolidation review. This charge consisted of employee
severance and related costs of (UK Pound)5.6 million for approximately 470
employees to be terminated and lease exit costs of (UK Pound)2.9 million.
As of September 30, 2001, (UK Pound)880,000 of the provision had been used
for employee severance and related costs and approximately 90 employees had
been terminated. The remaining restructuring reserve of (UK Pound)7.7
million includes (UK Pound)4.8 million for employees severance and related
costs and (UK Pound)2.9 million for lease exit costs.
6
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
4. Property and Equipment
Property and equipment consist of (in (UK Pound)000's):
September 30, December 31,
2001 2000
------------------- -------------------
(Unaudited)
Operating equipment.................................. (UK Pound)519,829 (UK Pound)498,922
Other equipment...................................... 60,925 57,125
Construction in progress............................. 78,251 51,652
------------------- -------------------
659,005 607,699
Accumulated depreciation............................. (185,602) (141,542)
------------------- -------------------
(UK Pound)473,403 (UK Pound)466,157
=================== ===================
5. Intangible Assets
Intangible assets consist of (in (UK Pound)000's):
September 30, December 31,
2001 2000
------------------ ------------------
(Unaudited)
Goodwill, net of accumulated amortization of
(UK Pound)52,456 (2001) and (UK Pound)34,955 (2000).. (UK Pound)297,452 (UK Pound)314,953
License acquisition costs, net of accumulated
amortization of (UK Pound)16,230 (2001)
and (UK Pound)10,820 (2000).......................... 19,838 25,248
Customer lists, net of accumulated amortization of
(UK Pound)13,498 (2001) and (UK Pound)8,365 (2000)... 18,824 23,957
Other, net of accumulated amortization of (UK
Pound)31,081 (2001) (UK Pound)26,838 (2000).......... 27,282 31,525
------------------ ------------------
(UK Pound)363,396 (UK Pound)395,683
================== ==================
6. Joint Purchasing Alliance Agreement
As of September 30, 2001 and December 31, 2000, other assets include a
receivable for a deposit of (UK Pound)7.0 million and (UK Pound)21.3
million, respectively, which will be utilized under a Joint Purchasing
Alliance Agreement entered into between subsidiaries of the Company and
Diamond Cable Communications Limited, a subsidiary of NTL, for combined
fixed asset purchases. The Company's original deposit was (UK Pound)51.9
million in March 1999.
7
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
7. Related Party Transactions
In October 2000, NTL Communications (Ireland) Limited entered into a loan
agreement with a subsidiary of NTL to provide funding of up to (IR
Pound)300.0 million ((UK Pound)235.9 million), of which (IR Pound)74.0
million ((UK Pound)58.2 million) and (IR Pound)32.0 million ((UK Pound)25.5
million) had been borrowed at September 30, 2001 and December 31, 2000,
respectively. The outstanding borrowings are due in October 2007. Interest
is payable quarterly in arrears from March 31, 2001. The annual interest
rate is set on January 1 of each year at the 12-month EURIBOR rate plus 1%.
The effective interest rate at September 30, 2001 was 5.69%. Accrued
interest of (IR Pound)1.0 million ((UK Pound)801,000) and (IR Pound)257,000
((UK Pound)205,000) was included in due to affiliates in the consolidated
balance sheet at September 30, 2001 and December 31, 2000, respectively.
Since the acquisition of the Company by NTL in October 1998, a subsidiary
of NTL has been providing services to and assets for use by the Company.
This subsidiary has been charging the Company for these services and assets
since the fourth quarter of 1999. The scope of the services and assets
provided has increased as the Company has become further integrated with
NTL and consequently these charges have increasingly comprised a larger
portion of Company's costs. These charges are made by the subsidiary
primarily in respect of:
a) the provision of corporate services, including finance, legal, HR and
facility services,
b) the provision by the subsidiary of IT services and the Company's use
of the related IT equipment, and
c) the use of the national backbone telephony network of the subsidiary
for carriage of the Company's telephony traffic, as well as the
provision of the technical infrastructure and network capacity for the
Company's subscription free Internet service.
The charges are made on the basis of allocation formulae appropriate to
each category of charge. For the nine months ended September 30, 2001 and
2000 the Company was charged (UK Pound)39.8 million and (UK Pound)16.6
million, respectively. For the 2001 amount, (UK Pound)9.9 million was
included in operating costs and (UK Pound)29.9 million was included in
selling, general and administrative expense. For the 2000 amount, (UK
Pound)1.3 million was included in operating costs and (UK Pound)15.3
million was included in selling, general and administrative expense. It is
not practicable to determine the amounts of these expenses that would have
been incurred had the Company operated as an unaffiliated entity. In the
opinion of the management of the Company, these payments are fair and
reasonable to the Company.
In the third quarter of 2001, the Company used cash contributed by its
parent, which increased shareholder's equity, to repay primarily all of the
due to affiliates balance.
8. Stock Options
In September 2000, the NTL Board of Directors approved modifications to
certain stock options granted to NTL employees in November 1999 through May
2000. Options to purchase an aggregate of approximately 16.5 million shares
of NTL common stock with a weighted average exercise price of $64.39 per
share were modified such that the exercise price was reduced to $44.50 per
share and the vesting schedule was delayed and/or lengthened. NTL is
accounting for these options as a variable plan beginning in September
2000. The Company will recognize its share of non-cash compensation expense
for the difference between the quoted market price of the common stock and
the exercise price of the vested options while the options remain
outstanding. The NTL Compensation Committee has taken this action to
continue to provide the appropriate performance incentives to those
affected.
9. Contingencies
The Company is involved in legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not materially
affect the financial position, results of operations or liquidity of the
Company.
8
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- ------------------------------------------------------------------------
OF OPERATIONS
-------------
Overview
- --------
NTL (Triangle) LLC (the "Company") is a holding company which holds all of the
shares of various companies principally engaged in the development,
construction, management and operation of broadband communications networks for
telephone, cable television and Internet services in the United Kingdom ("UK")
and Ireland. The Company owns the companies that have franchises for Darlington
and Teesside (collectively, "Teesside") and Cambridge in the UK, and NTL
Communications (Ireland) Limited (formerly Cablelink Limited) ("Cablelink"),
which owns the companies that provide services in Dublin, Galway and Waterford,
Ireland.
Liquidity and Capital Resources
- -------------------------------
In November 1995, the Company issued $517.3 million principal amount at maturity
of 11.20% Senior Discount Debentures due 2007 (the "2007 Discount Debentures").
The carrying value of the 2007 Discount Debentures was (UK Pound)352.1 million
and (UK Pound)345.9 million at September 30, 2001 and December 31, 2000,
respectively. Interest accreted on the 2007 Discount Debentures at 11.20% per
annum compounded semiannually from November 15, 1995 to November 15, 2000, after
which date interest became payable in cash on each May 15 and November 15
through November 15, 2007. The 2007 Discount Debentures contain restrictive
covenants which limit the Company's ability to pay dividends.
The Company currently estimates that it will require approximately (UK
Pound)60.0 million from October 1, 2001 through September 30, 2002 for capital
expenditures and debt service, net of cash from operations. Management expects
that the (UK Pound)60.0 million required will be funded through cash on hand,
debt or equity from NTL or its subsidiaries and from the Joint Purchasing
Alliance Agreement deposit of (UK Pound)7.0 million. Subsidiaries of the Company
and Diamond Cable Communications Limited, a subsidiary of NTL, entered into this
agreement in 1999 for joint fixed asset purchases. The Company's ability to meet
its long-term liquidity and capital requirements is contingent upon Cambridge,
Teesside and Cablelink's ability to generate positive operating cash flow, or,
if necessary, to obtain external financing, although there can be no assurance
that any such financing will be obtained on acceptable terms and conditions.
In October 2000, Cablelink entered into a loan agreement with a subsidiary of
NTL to provide funding of up to (IR Pound)300.0 million ((UK Pound)235.9
million), of which (IR Pound)74.0 million ((UK Pound)58.2 million) and (IR
Pound)32.0 million ((UK Pound)25.5 million) had been borrowed at September 30,
2001 and December 31, 2000, respectively. The outstanding borrowings are due in
October 2007. Interest is payable quarterly in arrears from March 31, 2001. The
annual interest rate is set on January 1 of each year at the 12-month EURIBOR
plus 1%. The effective interest rate at September 30, 2001 was 5.69%. Accrued
interest of (IR Pound)1.0 million ((UK Pound)801,000) and (IR Pound)257,000 ((UK
Pound)205,000) was included in due to affiliates in the consolidated balance
sheet at September 30, 2001 and December 31, 2000, respectively.
Condensed Consolidated Statements of Cash Flows
- -----------------------------------------------
Net cash (used in) provided by operating activities amounted to (UK Pound)(20.7)
million and (UK Pound)41.4 million for the nine months ended September 30, 2001
and 2000, respectively. The decrease in net cash provided by operating
activities is primarily due to the increase in cash paid during the period for
interest and changes in working capital as a result of the timing of receipts
and disbursements.
Net cash used in investing activities amounted to (UK Pound)(53.8) million and
(UK Pound)70.5 million for the nine months ended September 30, 2001 and 2000,
respectively. During the nine months ended September 30, 2001, net cash used in
investing activities was entirely used for capital expenditures.
9
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
Net cash provided by financing activities amounted to (UK Pound)83.2 million and
(UK Pound)14.3 million for the nine months ended September 30, 2001 and 2000,
respectively. During the nine months ended September 30, 2001, net cash provided
by financing activities includes (UK Pound)33.3 million in cash received by
Cablelink from a subsidiary of NTL and contributions from NTL Group Limited of
(UK Pound)50.2 million. Net cash provided by financing activities in the nine
months ended September 30, 2000 included (UK Pound)15.6 million in cash received
by Cablelink from a subsidiary of NTL.
Results of Operations
- ---------------------
Consolidated financial information for the Company for the nine and three months
ended September 30, 2001 and 2000 is as follows (in (UK Pound)000's, "NM"
denotes percentage is not meaningful):
Nine Months Ended
September 30, Increase/(Decrease)
2001 2000 (UK Pound) %
--------------------- ------------------- ------------------- --------
Revenues.................................... (UK Pound)131,651 (UK Pound)117,291 (UK Pound)14,360 12.2%
Operating, selling, general and
administrative expenses..................... 121,519 101,494 20,025 19.7
Other charges............................... 833 - 833 NM
Depreciation and amortization............... 76,952 62,692 14,260 22.7
------------------- ------------------
Operating loss.............................. (67,653) (46,895) 20,758 44.3
------------------- ------------------
Interest expense............................ 30,162 26,271 3,891 14.8
Interest expense to affiliate............... 2,029 - 2,029 NM
Investment income........................... (177) (1,234) (1,057) (85.7)
Exchange losses............................. 6,080 31,444 (25,364) (80.7)
------------------- ------------------
Loss before income taxes.................... (105,747) (103,376) 2,371 2.3
Income tax (expense) benefit................ (34) 600 (634) (105.7)
------------------- ------------------
Net loss.................................... (UK Pound)(105,781) (UK Pound)(102,776) 3,005 2.9
=================== ==================
Three Months Ended
September 30, Increase/(Decrease)
2001 2000 (UK Pound) %
--------------------- ------------------- ------------------- --------
Revenues.................................... (UK Pound)43,949 (UK Pound)39,679 (UK Pound)4,270 10.8%
Operating, selling, general and
administrative expenses..................... 39,879 40,936 (1,057) (2.6)
Other charges............................... 833 - 833 NM
Depreciation and amortization............... 25,362 22,600 2,762 12.2
------------------- ------------------
Operating loss.............................. (22,125) (23,857) (1,732) (7.3)
------------------- ------------------
Interest expense............................ 10,072 9,294 778 8.4
Interest expense to affiliate............... 808 - 808 NM
Investment income........................... (29) (436) (407) (93.3)
Exchange (gains) losses..................... (16,076) 8,978 25,054 279.1
------------------- ------------------
Loss before income taxes.................... (16,900) (41,693) (24,793) (59.5)
Income tax benefit.......................... - 525 (525) (100.0)
------------------- ------------------
Net loss.................................... (UK Pound)(16,900) (UK Pound)(41,168) (24,268) (58.9%)
=================== ==================
For the nine and three months ended September 30, 2000, certain costs have been
reclassified from selling, general and administrative expenses to operating
costs to conform to the 2001 classification.
Revenue was (UK Pound)131.7 million, (UK Pound)43.9 million, (UK Pound)117.3
million and (UK Pound)39.7 million for the nine and three months ended September
30, 2001 and 2000, respectively. Revenue increased (UK Pound)14.4 million and
(UK Pound)4.2 million in the nine and three months ended September 30, 2001,
respectively, as compared to the same periods in 2000, as a result of price
increases, upselling new services to customers and from growth in the Company's
customer base. Revenue increases in the future
10
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
are also expected to be achieved by providing new services such as digital
television, cable modem and mobile telephone services.
Operating costs (including network costs) were (UK Pound)60.5 million, (UK
Pound)18.4 million, (UK Pound)51.1 million and (UK Pound)20.7 million for the
nine and three months ended September 30, 2001 and 2000, respectively. Operating
costs increased (UK Pound)9.4 million in the nine months ended September 30,
2001 as compared to the same period in 2000. Operating costs decreased (UK
Pound)2.3 million in the three months ended September 30, 2001 as compared to
the same period in 2000. The increase in the nine month period is the result of
increases in interconnection and programming costs due to usage and customer
growth. The decrease in the three month period reflects cost savings efforts
such as fault reduction and increased field force effectiveness. Operating costs
include certain costs which are charged by a subsidiary of NTL for the use of
the national backbone telephony network of the subsidiary for carriage of the
Company's telephony traffic, as well as the provision of the technical
infrastructure and network capacity for the Company's subscription free Internet
service. In the nine and three month periods ended September 30, 2001 and 2000,
these charges were (UK Pound)9.9 million, (UK Pound)2.6 million, (UK Pound)1.3
million and (UK Pound)764,000, respectively. The increase in these charges is
primarily due to the ongoing operating integration of the Company with the rest
of NTL, as well as the introduction of the Internet service.
Selling, general and administrative expense were (UK Pound)61.0 million, (UK
Pound)21.5 million, (UK Pound)50.4 million and (UK Pound)20.3 million for the
nine and three months ended September 30, 2001 and 2000, respectively. Selling,
general and administrative expense includes certain costs which are charged by a
subsidiary of NTL for the provision of corporate services, including finance,
legal, HR and facility services, and for the provision of IT services, including
the Company's use of the related IT equipment. These charges were (UK Pound)29.9
million, (UK Pound)9.9 million, (UK Pound)15.3 million and (UK Pound)9.3 million
for the nine and three months ended September 30, 2001 and 2000, respectively.
The increase in these charges is primarily due to the ongoing operating
integration of the Company with the rest of NTL.
Other charges in 2001 are for restructuring costs of (UK Pound)833,000 incurred
by Cablelink. This charge consisted of employee severance and related costs of
(UK Pound)143,000 for 10 employees who were terminated, and lease exit costs of
(UK Pound)690,000. As of September 30, 2001, (UK Pound)79,000 of the provision
had been used for employee severance and related costs. The remaining
restructuring reserve of (UK Pound)754,000 includes (UK Pound)64,000 for
employee severance and related costs and (UK Pound)690,000 for lease exit costs.
Interest expense was (UK Pound)30.2 million, (UK Pound)10.1 million, (UK
Pound)26.3 million and (UK Pound)9.3 million for the nine and three months ended
September 30, 2001 and 2000, respectively, representing increases of (UK
Pound)3.9 million and (UK Pound)778,000 as compared to the same periods in 2000.
The increases are primarily attributable to the compounding of interest on the
2007 Discount Debentures.
In October 2000, Cablelink entered into a loan agreement with a subsidiary of
NTL to provide funding of up to (IR Pound)300.0 million ((UK Pound)235.9
million), of which (IR Pound)74.0 million ((UK Pound)58.2 million) had been
borrowed at September 30, 2001. Interest expense to affiliate was (UK Pound)2.0
million and (UK Pound)808,000 for the nine and three months ended September 30,
2001, respectively.
Investment income was (UK Pound)177,000, (UK Pound)29,000, (UK Pound)1.2 million
and (UK Pound)436,000 for the nine and three months ended September 30, 2001 and
2000, respectively, representing decreases of (UK Pound)1.1 million and (UK
Pound)407,000 as compared to the same periods in 2000. The decreases are
primarily attributable to decreases in the average cash balances available for
investment in 2001 as compared to the same periods in 2000.
Exchange gains (losses) were (UK Pound)(6.1) million, (UK Pound)16.1 million,
(UK Pound)(31.4) million and (UK Pound)(9.0) million for the nine and three
months ended September 30, 2001 and 2000, respectively, representing gains of
(UK Pound)25.3 million and (UK Pound)25.1 million as compared to the same
periods in 2000. The gains are primarily attributable to fluctuations in the
valuation of the UK Pound Sterling on the 2007 Discount Debentures, which are
denominated in US dollars. The Company's results of operations will continue to
be affected by exchange rate fluctuations.
The Company recorded restructuring costs in November 2000 as a result of the
completion of a consolidation review. This charge consisted of employee
severance and related costs of (UK Pound)5.6 million for approximately 470
employees to be terminated and lease exit costs of (UK Pound)2.9 million. As of
September 30, 2001, (UK Pound)880,000 of the provision had been used for
employee severance and related costs and approximately 90 employees had been
terminated. The remaining restructuring reserve of (UK Pound)7.7 million
includes (UK Pound)4.8 million for employees severance and related costs and (UK
Pound)2.9 million for lease exit costs.
11
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
In September 2000, the NTL Board of Directors approved modifications to certain
stock options granted to NTL employees in November 1999 through May 2000.
Options to purchase an aggregate of approximately 16.5 million shares of NTL
common stock with a weighted average exercise price of $64.39 per share were
modified such that the exercise price was reduced to $44.50 per share and the
vesting schedule was delayed and/or lengthened. NTL is accounting for these
options as a variable plan beginning in September 2000. The Company will
recognize its share of non-cash compensation expense for the difference between
the quoted market price of the common stock and the exercise price of the vested
options while the options remain outstanding. The NTL Compensation Committee has
taken this action to continue to provide the appropriate performance incentives
to those affected.
Recent Accounting Pronouncements
- --------------------------------
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. SFAS No. 142 ends the amortization of goodwill and
indefinite-lived intangible assets. Instead, these assets must be reviewed
annually (or more frequently under certain conditions) for impairment in
accordance with this statement. This impairment test uses a fair value approach
rather than the undiscounted cash flow approach previously required by SFAS No.
121. "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." Intangible assets that do not have indefinite lives
will continue to be amortized over their useful lives and reviewed for
impairment in accordance with SFAS No. 121. The Company is required to adopt
SFAS No. 142 as of January 1, 2002. The Company has not yet completed an
analysis of whether goodwill may be impaired under SFAS No. 142; this analysis
will be completed during the first six months of 2002 in accordance with the
transition provisions of SFAS No. 142. The Company expects to complete an
analysis for the fourth quarter of 2001 to determine whether goodwill is
impaired under SFAS No. 121. The magnitude of an impairment charge, if any,
under either accounting standard cannot be determined at this time.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
- --------------------------------------------------------------------------------
Certain statements contained herein constitute "forward-looking statements" as
that term is defined under the provisions of the Private Securities Litigation
Reform Act of 1995. When used herein, the words "believe," "anticipate,"
"should," "intend," "plan," "will," "expects," "estimates," "projects,"
"positioned," "strategy," and similar expressions identify such forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from those contemplated, projected, forecasted, estimated or budgeted, whether
expressed or implied, by such forward-looking statements. Such factors include,
among others: general economic and business conditions, technological
developments, the Company's ability to continue to design networks, install
facilities, obtain and maintain any required governmental licenses or approvals
and finance construction and development, all in a timely manner at reasonable
costs and on satisfactory terms and conditions, as well as assumptions about
customer acceptance, churn rates, overall market penetration and competition
from providers of alternative services, the impact of restructuring and
integration actions, the impact of new business opportunities requiring
significant up-front investment, interest rate and currency exchange rate
fluctuations and availability, terms and deployment of capital. The Company
assumes no obligation to update the forward-looking statements contained herein
to reflect actual results, changes in assumptions or changes in factors
affecting such statements.
12
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
PART II. OTHER INFORMATION
- -------- -----------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits:
None.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the
quarter ended September 30, 2001.
13
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2001
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NTL (TRIANGLE) LLC
-----------------------------------------
(Registrant)
By: NTL Group Limited
Its Sole Managing Member
Date: November 12, 2001 By: /s/ Stephen A. Carter
-----------------------------------------
Stephen A. Carter
(Director and Chief Operating Officer of
NTL Group Ltd., the sole managing member)
on behalf of registrant
Date: November 12, 2001 By: /s/ Stuart Ross
-----------------------------------------
Stuart Ross
(Director and Chief Financial Officer of
NTL Group Ltd., the sole managing member)
on behalf of registrant
14